Sri Rajiv Manharlal Duseja , Bangalore V. Assistant Commissioner of Income Tax Circle-2(1), Bangalore

ITA 2323/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1233 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: PREETHI S PATEL
• Keywords: Gift; Reasonable cause; Set aside
• Section: 273B; 143(3); 271D; 271E; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER ITA NO.2323/BANG/2018 ASSESSMENT YEAR : 2007-08 SRI RAJIV MANHARLAL DUSEJA, NO.39, NANJAPPA ROAD, SHANTHINAGAR, BANGALORE-560 027. PAN ADJPD 9123 D.. VS. THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-2(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : MS. PREETHI S PATEL, ADVOCATE RESPONDENT BY : DR. P.V PRADEEP KUMAR, ADDL. CIT (DR) DATE OF HEARING : 04.04.2019 DATE OF PRONOUNCEMENT : 04.06.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 14-06-2018 PASSED BY LD CIT(A)-7, BENGALURU C ONFIRMING THE PENALTY OF RS.2.20 LAKHS LEVIED BY THE ADDITIONAL C OMMISSIONER OF INCOME TAX IN ASSESSMENT YEAR 2007-08 FOR TAKING CA SH LOANS IN VIOLATION OF PROVISIONS OF SEC.269SS OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE AO, WHILE COMPLETING THE ASSESSMENT U/S 143(3) R.W.S. 254 OF THE ACT NOTICED ITA NO.2323/BANG/2018 PAGE 2 OF 9 THAT THE ASSESSEE HAS TAKEN FOLLOWING LOANS IN CASH , WHICH WAS IN VIOLATION OF PROVISIONS OF SEC. 269SS OF THE ACT:- SMT. INDIRA MEGHRAJ - 1,20,000 SHRI MANOHAR DUSEJA - 1,00,000 --------------- 2,20,000 ========== SHRI MANOHAR DUSEJA WAS FATHER OF ASSESSEE AND SMT . INDIRA MEGHRAJ WAS HIS PATERNAL AUNT. THE PENALTY PROCEED INGS U/S 271D WAS INITIATED BY LD ADDL. CIT. 3. BEFORE ADDL. CIT, THE ASSESSEE STATED THAT THE LOANS WERE NOT TAKEN AT A TIME AND THE SAME WAS TAKEN INSTALMENTS. IT WAS SUBMITTED THAT THE ASSESSEE WAS UNDER THE BELIEF TH AT THE PROVISIONS OF SEC.269SS OF THE ACT WOULD BE ATTRACT ED ONLY IF THE BORROWINGS MADE IN CASH AT EACH STAGE EXCEEDS THE L IMIT OF RS.20,000/-. IT WAS FURTHER SUBMITTED THAT THE LOA NS HAVE BEEN TAKEN FROM FAMILY MEMBERS AND ACCORDINGLY RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS TO CONTEND THAT THE LOAN TR ANSACTIONS BETWEEN FAMILY MEMBERS WOULD NOT ATTRACT PROVISIONS SEC. 269SS:- (A) MOHAN KARKARE VS. DCIT (1995)(127 TAXATION 10 4) (B) CIT VS. T.S.RENGARAJAN (ORDER DATED 24-02-200 5) HOWEVER, THE LD ADDL. CIT WAS NOT CONVINCED WITH TH E CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY LEVIED PENALTY OF R S.2,20,000/- U/S 271D OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAME. 4. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE NOTICE THAT THE CO-ORDINATE BENCH OF TRI BUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF SMT. D EEPIKA VS. ADDL ITA NO.2323/BANG/2018 PAGE 3 OF 9 CIT (ITA NO.561/BANG/2017 DATED 13.10.2017) AND HEL D THAT THE TRANSACTIONS BETWEEN FAMILY MEMBERS WOULD NOT ATTRA CT PENALTY U/S 271D OF THE ACT. FOR THE SAKE OF CONVENIENCE, WE E XTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE CO-ORD INATE BENCH IN THE ABOVE SAID CASE:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE F ACTS AS DECIDED BY ITAT KOLKATA IN THE CASE OF DR.B.G.PANDA WERE THAT LOAN TRANSACTIONS WERE CARRIED OUT IN CASH IN VIOLATION OF THE PROVISIONS OF SEC.269SS OF THE ACT BETWEEN HUSB AND AND WIFE. ON THE QUESTION OF LEVY OF PENALTY U/S.271D O F THE ACT, THE TRIBUNAL HELD AS FOLLOWS :- 'SECTION 269SS IS APPLICABLE TO THE DEPOSITS OR LOA N. IT IS TRUE THAT BOTH IN THE CASE OF A LOAN AND IN THE CASE OF A DEPOSIT, THERE IS A RELATIONSHIP OF DEBTOR OR CRE DITOR BETWEEN THE PARTY GIVING MONEY AND THE PARTY RECEIV ING MONEY. IN THE CASE OF DEPOSIT. THE DELIVERY OF MONE Y IS USUALLY AT THE INSTANCE OF THE GIVER AND IT IS FOR THE ITA NO.561/BANG/2017 BENEFIT OF THE PERSON WHO DEPOSITS THE MONEY AND THE BENEFIT NORMALLY BEING THE EARNIN G OF INTEREST FROM THE PARTY WHO CUSTOMARILY ACCEPTS DEPOSIT. IN THE CASE OF LOAN IT IS THE BORROWER AT WHOSE INSTANCE AND FOR WHOSE NEEDS THE MONEY IS ADVANCED. THE BORROWING IS PRIMARILY FOR THE BENEFIT OF A BOR ROWER ALTHOUGH THE PERSON WHO LENDS THE MONEY MAY ALSO STAND TO GAIN THEREBY EARNING INTEREST ON THE MONEY LENT. IN THE INSTANT CASE, THIS CONDITION WAS NOT APPLICABLE BECAUSE THERE WAS NO RELATIONSHIP OF THE DEPOSITOR OR A CREDITOR AS NO INTEREST WAS INVOLVED . THIS WAS NEITHER A LOAN NOR A DEPOSIT. AT THE SAME TIME. THE WORDS 'ANY OTHER PERSON' ARE OBVIOUSLY A REFERENCE TO THE DEPOSITOR AS PER THE INTENTION OF THE LEGISLATU RE. THE COMMUNICATION/TRANSACTION BETWEEN THE HUSBAND AND WIFE ARE PROTECTED FROM THE LEGISLATION AS LONG AS THEY ARE NOT FOR COMMERCIAL USE. OTHERWISE, THERE WOULD BE A POWERFUL TENDENCY TO DISTURB THE PEACE O F FAMILIES. TO PROMOTE DOMESTIC BROILS, AND TO WEAKEN OR TO DESTROY THE FEELING OF MUTUAL CONFIDENCE WHICH I S THE MOST ENDURING SOLACE OF MARRIED LIFE. ITA NO.2323/BANG/2018 PAGE 4 OF 9 IN THE INSTANT CASE, THE WIFE GAVE MONEY TO HUSBAND FOR CONSTRUCTION OF A HOUSE WHICH WAS NATURALLY A JOINT VENTURE FOR THE PROPERTY OF THE FAMILY ONLY. THIS TRANSACTION WAS NOT FOR COMMERCIAL USE. THE AMOUNT DIRECTLY RECEIVED BY THE HUSBAND. I.E .. THE ASSESS EE. WAS TO THE EXTENT OF RS. 17.000 ONLY AND THE BALANC E AMOUNT OF RS. 26.000 WAS GIVEN BY PAYMENT DIRECTLY TO THE SUPPLIER OF THE MATERIAL REQUIRED FOR THE CONSTRUCTION OF THE HOUSE. THOUGH THE EXPENDITURE W AS APPARENTLY INCURRED BY THE HUSBAND BEING THE KARTA/HEAD OF THE FAMILY, IT COULD NOT BE SAID THAT THE WIFE COULD NOT HAVE ANY INTEREST OF HER OWN IN THIS HOUSE BEING CONSTRUCTED. THE TRANSACTION WAS NEITHE R LOAN NOR ANY GIFT AS NO 'INTEREST' ELEMENT WAS INVO LVED AND THERE WAS NO PROMISE TO RETURN THE AMOUNT WITH OR WITHOUT INTEREST. IT WAS CLEAR THAT THE MONEY GIVEN BY THE WIFE WAS A JOINT VENTURE OF THE FAMILY. TAKING INTO CONSIDERATION OVERALL FACTS AND CIRCUMSTANCES OF TH E CASE, IT COULD BE SAID THAT THE AFORESAID PIECE OF LEGISLATION WAS NOT APPLICABLE IN THE INSTANT CASE. BY TAKING THE LIBERAL VIEW AND APPLYING THE GOLDEN RUL E OF INTERPRETATION, THE ASSESSEE HAD A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 27 3B. THEREFORE. THE PENALTY SHOULD BE DELETED. 8. IN THE CASE OF ACIT VS. VARDAAN FASHION (2015) 6 0 TAXMANN.COM 407 (DELHI-TRIB.) IT WAS HELD THAT WHER E THE ASSESSEE INTENDED TO PURCHASE A PROPERTY JOINTLY FO R WHICH ASSESSEE'S WIFE HAD ADVANCED A SUM OF MONEY TO ASSE SSEE AND WHEN DEAL FOR PURCHASE OF SUCH HOUSE ITA NO.561/BANG/2017 PROPERTY DID NOT MATERIALIZE, ASSE SSEE REFUNDED SAID AMOUNT THROUGH CHEQUE TO HIS WIFE. ON THE QUESTION WHETHER ACCEPTANCE OF CASH BY HUSBAND FROM HIS WIFE WOULD AMOUNT TO TAKING OF LOAN OR ADVANCE IN S TRICT SENSE OF SECTION 269SS , THE TRIBUNAL HELD THAT IT CANNOT BE CONSTRUED AS LOAN ATTRACTING PROVISIONS OF SEC.269S S OF THE ACT AND THEREFORE NO PENALTY UNDER SECTION 271D COULD BE LEVIED. 9. THE INCOME-TAX APPELLATE TRIBUNAL, AMRITSAR BENC H, IN THE CASE OF ITO V. TARLOCHAN SINGH [2003] 128 TAXMAN 20 (MAG) WAS CONCERNED WITH A CASE WHERE THE HUSBAND HAD TAK EN THE ITA NO.2323/BANG/2018 PAGE 5 OF 9 CASH OF RS. 70,000 FROM HIS WIFE FOR THE PURPOSE OF INVESTMENT IN THE ACQUISITION OF IMMOVABLE PROPERTY . THE ASSESSING OFFICER HAD LEVIED THE PENALTY UNDER SECTION 271D WHICH WAS CANCELLED BY THE INCOME-TAX APPELLATE TRIBUNAL HOLDING AS UNDER : 'EVEN KEEPING IN VIEW THE CONTENTS OF THE DEPARTMEN TAL CIRCULAR NO. 387 [1985] 152 ITR (ST.) 1), IT WAS NE VER THE INTENTION OF THE LEGISLATURE TO PUNISH A PARTY INVOLVED IN A GENUINE TRANSACTION. THEREFORE, BY TA KING A LIBERAL VIEW IN THE INSTANT CASE, THE ASSESSEE HA D A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B . THUS, KEEPING IN VIEW THE ENTIRE FACTS OF THE INSTA NT CASE, AND ALSO KEEPING IN VIEW THE INTENTION OF THE LEGISLATURE IN ENACTING THE PROVISIONS OF SECTION 2 69SS, IT WAS TO BE HELD THAT THE ASSESSEE WAS PREVENTED B Y SUFFICIENT CAUSE FROM RECEIVING THE MONEY BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. I N THE INSTANT CASE, THE ASSESSEE WAS OF THE OPINION T HAT THE AMOUNT IN QUESTION DID NOT REQUIRE TO BE RECEIV ED BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT. THUS, THERE WAS A REASONABLE CAUSE AND NO PENALTY SHOULD HAVE BEEN LEVIED. FROM THE ABOVE, IT WOULD BE CLEAR THAT THE ASSESSEE HAD TAKEN PLEA THAT FIRSTLY THERE WAS NO VIOLATION OF T HE PROVISIONS OF SECTION 269SS. SECONDLY, THERE WAS A REASONABLE CAUSE. THIRDLY, THE ASSESSEE WAS UNDER T HE BONA FIDE BELIEF THAT HE WAS NOT REQUIRED TO RECEIV E THE AMOUNT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DRAFT. AS AN ALTERNATIVE SUBMISSION, IT WAS CONTENDED THAT THE DEFAULT COULD BE CONSIDERED EITHER TECHNICAL OR ITA NO.561/BANG/2017 VENIAL BREACH OF THE PROVISIONS OF LAW AND, THEREFORE, NO PENALTY UNDER SECTION 271D WAS LEVIABLE. IN VIEW OF THE ABOVE DISCUSSION, NO PENALTY UNDER SECTION 271D WAS LEVIABLE. IT IS WELL-SETTLED THAT PENALTY PROVISION SHOULD BE INTERPRETED AS IT STANDS AND, I N CASE OF DOUBT, IN A MANNER FAVOURABLE TO THE TAXPAY ER. IF THE COURT FINDS THAT THE LANGUAGE IS AMBIGUOUS O R CAPABLE OF MORE MEANING THAT THE ONE, THEN THE COUR T HAS TO ADOPT THE PROVISION WHICH FAVOURS THE ASSESS EE, ITA NO.2323/BANG/2018 PAGE 6 OF 9 MORE PARTICULARLY WHERE THE PROVISIONS RELATE TO TH E IMPOSITION OF PENALTY. IN VIEW OF THE ABOVE, THE PENALTY SUSTAINED BY THE COMMISSIONER (APPEALS) WAS CANCELLED.' 10. THE RATIO OF THE ABOVE DECISION OF THE INCOME-T AX APPELLATE TRIBUNAL, AMRITSAR BENCH, WOULD BE SQUARE LY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. HER E ALSO, THE DAUGHTER AND MEMBER OF THE HUF HAVE GIVEN MONEY FOR CERTAIN SPECIFIC PURPOSE. THE SOURCE AND GENUINENES S OF THE LOAN HAS BEEN ACCEPTED BY THE AO. THE CASH LOANS IN QUESTION THEREFORE CANNOT BE SAID FALL WITHIN THE MISCHIEF O F SEC.269SS OF THE ACT AS NEAR RELATIVES CANNOT BE SAID TO BE ' OTHER PERSON' WITHIN THE MEANING OF SEC.269SS OF THE ACT. IN ANY EVENT IN THE CIRCUMSTANCES OF THE CASE, THERE WAS R EASONABLE CAUSE FOR ACCEPTING LOANS IN CASH. 11. IN THE CASE OF CIT V. SUNIL KUMAR GOEL [2009] 315 ITR 163/183 TAXMAN 53 , THE HON'BLE PUNJAB AND HARYANA HIGH COURT HELD AS UNDER : 'A FAMILY TRANSACTION, BETWEEN TWO INDEPENDENT ASSESSEES, BASED ON AN ACT OF CASUALNESS, SPECIALLY IN A CASE WHERE THE DISCLOSURE THEREOF WAS CONTAINED IN THE COMPILATION OF ACCOUNTS, AND WHICH HAD NO TAX EFFEC T, ESTABLISHED 'REASONABLE CAUSE' UNDER SECTION 273B O F THE ACT. SINCE THE ASSESSEE HAD SATISFACTORILY ESTABLISHED 'REASONABLE CAUSE' UNDER SECTION 273B O F THE ACT, HE MUST BE DEEMED TO HAVE ESTABLISHED SUFFICIENT CAUSE FOR NOT INVOKING THE PENAL PROVISI ONS OF SECTIONS 271D AND 271E OF THE ACT AGAINST HIM. THE DELETION OF PENALTY BY THE TRIBUNAL WAS VALID.' 12. THAT THE RATIO OF THE ABOVE DECISION OF THE HON 'BLE PUNJAB AND HARYANA HIGH COURT WOULD ALSO BE SQUARELY APPLI CABLE IN RESPECT OF CASH TRANSACTION BETWEEN THE ASSESSEE AN D HIS NEAR RELATIVES. 13. IN THE CASE OF M.YESHODHA 351 ITR 265(MAD), THE HON'BLE MADRAS HIGH COURT HELD THAT TRANSACTION OF LOAN BET WEEN ITA NO.2323/BANG/2018 PAGE 7 OF 9 FATHER IN LAW AND DAUGHTER IN LAW IN CASH CANNOT BE SUBJECT MATTER OF LEVY OF PENALTY U/S.271D OF THE ACT. 14. IN THE LIGHT OF THE AFORESAID JUDICIAL PRONOUNC EMENTS, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY U/S.271D OF THE ACT CANNOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DEL ETED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE INSTANT CASE ALSO, WE HAVE NOTICED THA T THE ASSESSEE HAS TAKEN LOAN FROM HIS FATHER AND PATERNAL AUNT, WHO A RE FAMILY MEMBERS. WE NOTICE THAT THE CO-ORDINATE BENCH HAS FOLLOWED THE DECISION RENDERED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SUNIL KUMAR GOEL (SUPRA), WHEREIN IT HAS BE EN HELD THAT THE FAMILY TRANSACTIONS WOULD FALL WITHIN THE MEANING O F REASONABLE CAUSE U/S 273B OF THE ACT. FURTHER THE HONBLE MA DRAS HIGH COURT HAS CANCELLED THE PENALTY IN RESPECT OF LOAN TRANSACTIONS BETWEEN FATHER IN LAW AND DAUGHTER IN LAW IN THE DE CISION OF M.YESODHA (SUPRA). THE DECISION RENDERED IN THE CA SE OF SMT. DEEPIKA WAS FOLLOWED BY ANOTHER CO-ORDINATE BENCH I N THE CASE OF SHRI SANMATHI AMBANNA (ITA NO9.782/BANG/2017 DATED 02-01- 2019). ACCORDINGLY, CONSISTENT WITH THE VIEW TAKEN BY THE CO- ORDINATE BENCH IN THE CASE OF SMT. DEEPIKA (SUPRA), WHICH HAS BEEN RENDERED BY FOLLOWING VARIOUS DECISIONS OF HIGH COU RTS AND TRIBUNAL, WE HOLD THAT THE IMPUGNED PENALTY OF RS.2 .20 LAKHS IS NOT SUSTAINABLE. ACCORDINGLY WE SET ASIDE THE ORDER PA SSED BY LD CIT(A) AND DIRECT THAT THE PENALTY BE DELETED. ITA NO.2323/BANG/2018 PAGE 8 OF 9 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE, 2019. SD/ - (N.V VASUDEVAN) VICE PRESIDENT SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 4 TH JUNE, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3 . THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER A SST. REGISTRAR, ITAT, BANGALORE. ITA NO.2323/BANG/2018 PAGE 9 OF 9 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..